Nova Scotia Power wants fuel issue settled

Utility says province’s regulator should approve most of $5m to $6m in purchases

Nova Scotia Power president and CEO Bob Hanf addresses the media in July as work crews repair damage caused by post-tropical storm Arthur. (ADRIEN VECZAN / Staff)

Nova Scotia Power is asking the provincial regulator to allow most of the roughly $5 million to $6 million in fuel purchases that a consultant says shouldn’t be funded by ratepayers.

The utility said Monday that it doesn’t agree with Liberty Consulting Group’s math on the largest amount in question — $3.8 million to $4.9 million related to natural gas contracts.

That’s how much the consultant, working for the provincial Utility and Review Board, said the company overspent on natural gas over the past two years because of a long-term contract offer it passed up in 2008.

But the utility said in a filing Monday the offer included a price reopener that would have kicked in on Aug. 1, 2012, and raised the cost to current market rates.

Few contract details were made public, but it is believed Nova Scotia Power passed up a deal to buy gas previously secured by NewPage Port Hawkesbury, former owner of the paper mill in Point Tupper, until 2021.

A utility spokeswoman said Monday the company isn’t disputing the $903,000 amount it was previously sanctioned related to the gas deal. But Neera Ritcey said Nova Scotia Power believes the contract offer would have had a negative impact on customers in 2012-2013 and beyond. .

“We’re requesting that the board close this issue,” she said in an interview.

In its response to the audit report, the utility said the fact that production from the Sable Offshore Energy Project is dwindling faster than was expected in 2008 is among the factors affecting the later value of the gas offer.

The offshore gas field is expected to shut down in October 2016, the company said in its filing.

Nova Scotia Power is also telling the board there should be no sanction over the timing of changes to the company’s gas hedging program.

Liberty has recommended that $750,000 in fuel costs be disallowed because of delays making changes to the program.

But the company says it did take action in 2013-13, based on advice it received from outside experts.

“Nova Scotia Power submits there is no basis for a sanction to be imposed as the company has regularly evaluated strategies to minimize fuel price volatility on behalf of customers and will continue to do in the future,” the submission said.

Meanwhile, the utility does accept one of the Quentin, Pa. consultant’s proposed sanctions: a $300,000 amount that stems from a 2012 accident at the Trenton power plant.

The mishap, which knocked out one of the plant’s two generators for seven months, occurred when the wrong type of water was used in some machinery.

Repairs cost $6.3 million, with the amount being covered by insurance.

Nova Scotia Power said it believes company officials properly handled the incident but accepts the consultant’s view that several factors contributed to the outage.

Ritcey said Liberty notes in its report that the company has taken steps to address issues the incident raised.

“As well, noting the size of the adjustment, we do not think that a further review will provide any additional value for customers,” she said.

The utility said it agreed with 25 of Liberty’s 30 recommendations on fuel procurement.

“The company appreciates the positive comments made by Liberty in its audit report,” the filing said.

A hearing on the most recent audit findings is slated for Oct. 27 in Halifax.

Nova Scotia Power’s fuel bill was $497 million last year.

A previous audit concluded that Nova Scotia Power had overspent on fuel by roughly $23 million in 2010-11.

In the end, the board ordered the utility to return $4.5 million to ratepayers for fuel purchases.

The regulator also sanctioned the company for its conduct in response to the report. The amount was the cost of the hearing in the case.